Online Deals and Group Discounts as a Daily Deal Business Model

Groupon promotion of online deals is getting press all over the place in the last couple weeks. And they have an interesting and profitable twist on coupon advertising. They offer individuals the opportunity to participate in group discounts for very short-term offers if a minimum number of people sign up.

How Groupon Works

Groupon uses a daily deal business model. This is the site’s straightforward explanation:

1. Each day we feature something cool to do at an unbeatable price.
2. You only get it if enough people join that day… so invite your friends!
3. Check back the next day for another awesome Groupon!

The offers are geographically targeted, so mine relate to Chicago. Here are a sample of past offers in my city:

You will note they are in popular categories, like grocery items, restaurant, local services and local entertainment.

Why Their Group Discounts Work

The value proposition for the consumer is deals. The value proposition for the local business is volume sales. Here’s the site’s explanation. Ingeniously, they give consumers the incentive to promote the discounts to their friends because the deal is only possible if enough people sign up. Groupon collects the money from buyers, takes a fee and pays out to businesses if conditions are met. They now have programs in over 35 cities.